Schumer to propose overhaul of SEC

A report Wednesday criticizing the Securities and Exchange Commission's handling of the Bernie Madoff investigation has prompted one lawmaker to propose an overhaul of how Congress funds the commission.

The new bill, to be introduced next week by Sen. Chuck Schumer (D-NY.), would allow the SEC to fund itself through the fees it collects, rather than through the Congressional appropriations process.

"A major part of the SEC's problem is that its annual budget is lacking in resources," Schumer said during a conference call on Thursday. "I am introducing legislation next week, when we get back to Washington, so the SEC can use fees from institutions it regulates to fund its necessary operations."

Schumer's proposal arrives but a day after an inspector general's report revealed SEC investigators missed at least six opportunities over the past 16 years to follow up on a number of "lies and misrepresentations" in the Madoff case. The Senate's Banking Committee, on which Schumer is a senior member, will consider that report at a hearing scheduled for Sept. 10.

“In the 28 years I’ve been an elected official I’ve rarely seen an [inspector general's] report that is this shocking," Schumer said. "It shows monumental incompetence." The New York Democrat also labeled the commission's investigators and lawyers as "a gang that couldn’t shoot straight" and compared their "level of incompetence" to the Federal Emergency Management Authority's handling of Hurricane Katrina four years ago.

Schumer also told reporters on Thursday he hoped to pass his funding bill as part of a larger package to reform the embattled SEC. He already has at least one key supporter: SEC Chairwoman Mary Schapiro, who has previously touted the idea of a self-funded SEC system.